Maryland

The Bottom Line

Mixed Tax Picture

The Free State does not tax Social Security benefits, and seniors may qualify for a pension exclusion, which is worth up to $29,000. In addition to the state income tax, counties can levy an income tax, too. Maryland has a 6% statewide sales tax, with exemptions for medicine and most nonprepared foods.

State Sales Tax

6% (food, prescription and nonprescription drugs are exempt).

Income Tax Range

Low: 2% (on less than $1,000 of taxable income)

High: 5.75% (on more than $250,000 of taxable income for single filers; more than $300,000 for joint filers)

Maryland's 23 counties and Baltimore City may levy additional income taxes ranging from 1.75% to 3.20% of taxable income; per the Tax Foundation, the average levy is 2.9%.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Railroad Retirement income is not taxed. If you are 65 or older or totally disabled (or your spouse is totally disabled), you may qualify for Maryland's maximum pension exclusion, which is $29,000, under certain conditions. Distributions from 401(k), 403(b) and 457 plans can qualify for the pension exclusion. Foreign (out-of-country) government pensions do not qualify for the exemption. If you are a retired member of the military and at least 65 years old by December 31, you may be able to subtract up to $10,000 of your military pension from your federal adjusted gross income. If you or your spouse is 65 or over or blind, you are entitled to an extra $1,000 personal exemption, in addition to the regular personal exemption that you may be entitled to.

IRAs

Distributions do not qualify for the pension exclusion.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for the pension exclusion of up to $29,000.

Private Pensions

Qualifies for the pension exclusion of up to $29,000.

Public Pensions

Qualifies for the pension exclusion of up to $29,000. Foreign (out-of-country) government pensions do not qualify for the exemption. If you are a retired member of the military and at least 65 years old by December 31, you may be able to subtract up to $10,000 of your military pension from your federal adjusted gross income.

Property Taxes

The Homeowners' Property Tax Credit Program allows credits against a homeowner's property tax bill if the property taxes exceed a fixed percentage of the person's gross income.

The median property tax on Maryland's median home value of $288,500 is $3,154.

Tax breaks for seniors: A property tax deferral program allows property owners 65 or older to defer the increase in their property tax bill. Local governments must approve the program. The deferred taxes become a lien on the property and must be repaid when the property is transferred.

A Renters' Tax Credit program provides up to $750 a year for those age 60 and older or 100% disabled.

Inheritance and Estate Taxes

Maryland collects an inheritance tax. Property passing to a spouse, child or other lineal descendant, spouse of a child or other lineal descendant, parent, grandparent or sibling is exempt from taxation. Property passing to other individuals is subject to a 10% tax.

Maryland estate tax is imposed on estates exceeding $2 million, which will be increased to $3 million in 2017 and $4 million in 2018. In 2019 and beyond, Maryland will adopt the Federal threshold. The maximum tax rate is 16%.